Please correct answer and don't used hand raiting QUESTION 7Alexandria and Bob can each choose to Work or Not Work on a task. Each person's output is 80 euro for Not Work, and160 euro for Work. The cost of effort is 0 for Not Work and 70 euro for Work. The total output is shared equally betweenthe two. For example, if Alexandria puts in her effort but Bob does not, her net income is 120-70 = 50. Assume bothworkers are completely selfish. Based on this information, which of the following statements is correct?O a. The equilibrium outcome is the socially optimal outcome.b. In the equilibrium outcome, they both end up with a net income of 80 euro each.Oc. If Bob chooses to Not Work, he will definitely end up with a net income of 120 euro.Od. In the situation where both Alexandria and Bob put in effort, Alexandria does not have an incentive to deviate.

In light of Alexandria and Bob's decision on their work effort, it is imperative to understand the…

Answered: QUESTION 7 Alexandria and Bob can each…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter3: Scarcity, Trade-offs, And Production Possibilities

Section: Chapter Questions

Problem 3P

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Madeleine is a high school graduate deciding whether to go to university. She (like everyone else) lives for two periods after high school. In the first period, she can work (without university) for a salary of YH, or she can attend university. If she attends university, she must pay $5000 in fees (tuition, books), but she will also earn $5000 from a sum- mer job. In the second period, she will continue to earn YH if she did not attend university, or she will earn YU if she went to university. The interest rate at which money can be borrowed or invested is r. Show that she will attend university if YU . (2 1 r)YH. Explain how an increase in the interest rate would affect her decision to attend university.
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